First Poperty: Triple Decker vs Condo in Boston

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First Poperty: Triple Decker vs Condo in Boston

Reese Millican
Renter · Newton, MA · Member since 2013 · 19 posts · 5 votes

Hey BP,

I am a renter in Boston who wants to get into buy and hold/landlording in Boston MA. My cashflow is $2300 month net, and I estimate $1300 month maximum to pay for housing after non housing personal expenses.

I can already afford a condo, especially if I split it with someone, and come out ahead. However I want to make a profit, even a modest one with my firsr unit. Is it even possible to turn a profit renting a 2 bedroom condo in Boston if you live in one of the bedrooms?

My impression is that a 3D is the way to go if you want to turn a profit within your first months of renting. The plan is to live in one unit and rent out the other two. I would probably plow the first couple years profit into an emergency fund for repairs and possible evictions. I hold the place forever, and when the mortgage is paid I have passive rental income. However, I do not think I make enough to afford the mortgage and escrow on such a place now without rental income. With more income does a 3D in a place like Roxbury, Mattapan or Dorchester make sense? I know they are rough areas, but maybe do section 8 to get gvt assistance?

Lastly, I would like to more income and am interested in working in Real Estate, particularly in distressed mortgages or underwriting. Anyone have any leads on Boston jobs in this field?

Thanks you as always BP for any advice.

Reese

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  • Shaun Reilly
    Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y

    Well cash flowing a 3 family in Boston isn't going to bring in money hand over fist for you regardless of what you are looking for.

    Currently see all of 1 place that isn't a junker listed for under $300K any place in the city, and that is $289,900 with a recent price drop. If you bought this place at $280K and put 20% down and got a rate of 4.5% you would have a PI payment of $1135. Assuming you will self manage the place and the 2 rented units are bringing in about $2,100 right now so you are around break even.

    The 2 rented units are 2/1s and the rent looks like it may be slightly low, but I don't know the area as well as some others. It is Dorchester and I have a better feel for Brighton. You would have to live in the 1/1 unit.

    If you don't have close to $60K burning a hole in your pocket and went more like FHA at the same price and basic terms the payment is $1369 so you will likely be a little negative, though paying a smaller portion than you would possibly be able to rent for.

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  • Reese Millican
    OP
    Renter · Newton, MA · Member since 2013 · 19 posts · 5 votes
    12y

    Thank you as always, Shaun. What does a 2/1 unit mean? 2 bedroom, 1 bath?

    0Reply
  • Reese Millican
    OP
    Renter · Newton, MA · Member since 2013 · 19 posts · 5 votes
    12y

    Also, if the triple-decker idea is not great, does anyone a better idea for a first property for a buy and hold investor? Should I own out of state?

    0Reply
  • Reese Millican
    OP
    Renter · Newton, MA · Member since 2013 · 19 posts · 5 votes
    12y

    Also, If my mortgage is $1135 and my rents are $2100 total, why am I breaking even? Is it because 50% of rent needs to go to the maintenance/possible evictions? I'm okay with that: I am living close to rent free in a property that, once the mortgage is paid, privides passive cash flow equal to half of what I am currently earning.

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  • Shaun Reilly
    Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y
    Originally posted by Reese Millican:
    Thank you as always, Shaun. What does a 2/1 unit mean? 2 bedroom, 1 bath?

    Yes exactly.

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  • Shaun Reilly
    Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y
    Originally posted by Reese Millican:
    Also, if the triple-decker idea is not great, does anyone a better idea for a first property for a buy and hold investor? Should I own out of state?

    There isn't anything wrong with the idea, but just don't think you are going to be swimming in cash from the rental income.

    In this area prices are high so even with high rents the cash flow isn't that amazing. That being said you are much more likely to get high levels of appreciation then in many other places.

    I actually was joking with someone at a REIA last night that the key to making a killing investing in a 3 family around here is to have bought it 20 years ago.

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  • Shaun Reilly
    Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y
    Originally posted by Reese Millican:
    Also, If my mortgage is $1135 and my rents are $2100 total, why am I breaking even? Is it because 50% of rent needs to go to the maintenance/possible evictions? I'm okay with that: I am living close to rent free in a property that, once the mortgage is paid, privides passive cash flow equal to half of what I am currently earning.

    Yes that is the basic idea.

    The big things (that can't be mitigated really) would be the taxes (Though Boston does have an owner occupant exemption that lowers them, not sure how they do that with a owner occupied multi) and insurance (Which should be cheaper as an owner occupant too) as well as maintenance and repairs.

    You also should have a buffer for capital reserves. As in at some point you will need to do a roof even if not for many years and you will likely have 3 heating systems that at some point will each need replacement etc.

    Other things in that 50% that you have a little more control over is management (Assuming you will self manage an owner occupied 3 family, but still good to factor this in if you will eventually move and keep the property plus you should get "paid" for the effort), vacancy and eviction costs. Those last 2 you can help by doing a good job screening and retaining tenants.

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  • Nicholas Stevens
    Everett, MA · Member since 2013 · 49 posts · 11 votes
    12y

    Hi Reese - Yeah you are definitely thinking the right way. Yes, properties are more expensive in Boston area so you may not be able to cash flow right away but when you compare owning a 3 family or other rental to owning it's a no brainer for a lot of reasons. I bought a 3 family in Everett last year and was cash flow positive (in terms of PITI vers. rental income) right off the bat. There are less properties out there now versus even a year ago and is tougher now, but you will just have to keep your eye on MLS and other sources. The banks put the rental income figures towards your income too so it helps you in terms of qualifying for the mortgage.

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  • Reese Millican
    OP
    Renter · Newton, MA · Member since 2013 · 19 posts · 5 votes
    12y

    Shaun,

    Yeah, the priced look pretty high in Beantown, but I love living here and being close to the T so I can avoid a car.

    Nicholas,

    Thanks for the advice. It looks like I am on the right track here.

    Does anyone have any thoughts on a place like Detroit? The homes are so cheap if I save up I can own one outright.

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  • Shaun Reilly
    Landlord and Rehabber · Newton, MA · Member since 2010 · 2k+ posts · 877 votes
    12y

    Won't get into any general Detroit bashing.

    I will say that a lot of times properties are super cheap for a reason...

    I am sure that there are great deals to be had there but you probably have to know the areas well to be able to see the deals from the stuff that isn't worth getting for free.

    My personal opinion is that out of state investing is tougher when you are still pretty raw like you are. Not saying it isn't a good strategy or that you shouldn't do it, just that you need to do a lot of research before doing it.

    You will probably be "ready" to do an investment locally much sooner. If that is the better choice is a different question.

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  • Mike HurneyPro Member
    Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
    12y

    @Reese Millican would you consider moving to Detroit?

    Only folks I've seen succeed with profitable out of state investing (Buy-Fixup-Sell/Rent) spent a week per month there. Or they worked with other Investors in that area. i.e. You help with my Projects when you're there, I'll help with your Projects when I'm there.

    I like Massachusetts and especially Boston otherwise I wouldn't be living here.

    0Reply
  • Reese Millican
    OP
    Renter · Newton, MA · Member since 2013 · 19 posts · 5 votes
    12y

    Thank you all for the advice.

    I think I would like to do Boston first even though it requires more up front costs. I really like the idea of living in my investment and knowing the area first hand. And leverage can be overcome with positive cashflow.

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  • Mike HurneyPro Member
    Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
    12y

    @Reese Millican

    "... I would like to do Boston first..."

    The man with a plan!

    0Reply
  • Taoufik K.
    Boston, MA · Member since 2017 · 55 posts · 10 votes
    8y

    i know this very late. However, in reply to your question the current circumstances, you should be able to be cash positive most likely these days on a 3D. this is because 3 bed are now going for a minimum of +/- $1900/2000+ or more if you are lucky to find it in a nice area.  Although i find a very low inventory these days of 3D in the desirable parts of Boston.

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  • Maureen F.
    Milton, MA · Member since 2016 · 88 posts · 27 votes
    8y

    Check out the Boston Home Center, they have info for first time home buyers including 3Ds. There's City and state financing programs for purchase and renovation.

    0Reply
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